Aaah, Tax. Love it. Actually, I don’t pay tax on what I earn because I don’t earn enough- it’s okay, I’m fine. I’m not crying, the air is just quite cold today. And that’s what’s making my eyes water. I know I’m inside, but there must be a window open somewhere…
But actually, people often forget that income tax isn’t the only way a government gets their money. There are other forms of taxation, such as Road Tax and Inheritance Tax- but the main form of Tax that we’ll be focusing on today is Value Added Tax (or VAT for short).
VAT is a form of indirect tax– which means that people aren’t obliged to pay it- like they are with income tax. However, since you pay VAT on most items- it would be incredibly hard to go through life and not pay a penny of VAT. Companies decide the amount of VAT which is charged on each item- and companies which are required to charge VAT (that earn over a certain amount) must complete a VAT return which states how much revenue from VAT they have collected and how much they owe to HM Revenue and Customs (the government).
Wait, wasn’t this article supposed to be about the new pound coin?
Oh yes, that’s right. So what’s VAT got to do with the new pound coin? Well, the answer lies in spending. Before October, we all have two options- either trade your money in at the bank or spend it and get the new money in return as change. What do you think is the more common phrase? ‘I must trade in all my old money at the bank’, or ‘I need to get rid of all these pound coins’. I know which one of those I’ve said- and I’m not impressed with myself. I think the government know as well. Not just that most of us will spend our old money- but that this will result in more tax revenue through VAT. And combined fivers and pound coins- that’s a lot of tax revenue for the government which isn’t put on the record like income tax is.
So am I saying that this change in currency was an opportunistic shot at getting more money to ‘balance the books’? Well, I don’t doubt that there are many counterfeit coins and notes in circulation, but there have always been. Doesn’t it seem strange that the gov would issue a new fiver and a new pound coin- so soon after article 50 was triggered (the process of leaving the EU)? If it’s not opportunism, then its very poor timing on the Government’s part. And I find that quite hard to believe coming from a government with a leader that called a snap general election to TRY and increase her majority, a few weeks ago. They’re clever peeps.
So the next time you hear a politician speaking about how they’ve cut the deficit, balanced the books and managed not to raise taxes at the same time (the direct forms anyway)- then just remember (whether intentional or not) that this came from your own pockets…